According to today’s expert, if you don’t know the difference between right and wrong, well, you’re not paying attention. Our next guest is Dr. Pat Harned. She’s a CEO, but we’re going to talk today about the organization she leads here in D.C.: the Ethics and Compliance Initiative. Through that organization, she’s worked with a broad range of companies and organizations like British Petroleum and Penn State, perfect examples of organizations that suffered greatly from ethical challenges in the past.

ABERMAN: This is a big issue, and I’m really looking forward talking with you about that. Pat, thanks for joining me on the show.

HARNED: Thank you for having me!

ABERMAN: Ethics! It means a lot of different things to different people, sadly, and I think, in today’s environment, there’s a sense that ethics is somehow relative enough for negotiation. When you use the word “ethics,” what do you mean by that?

HARNED: When I talk with people about what ethics is, here’s how I explain it. I say, when you have a decision to make, the outcome of your decision, regardless of what you decide, if it has an impact on other people, you are facing an ethics-related situation. So, ethics has to do with what you should do, what you ought to do, what the right thing is to do.

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ABERMAN: And ethics can be found in different places, then? It can be in religion, it can be in just somebody trying to figure out what the right thing is to do, it can be in empathy. How do you recommend that an organization finds its ethical centers?

HARNED: For business leaders that want their organizations to have a high standard of ethics, what we’re really talking about is having a set of core values that should guide the decisions and the actions of everybody in the organization. So, it’s really about, how do we want to treat each other? How do we want to do our business? And that’s where ethics is a little bit different in a business or government context.

ABERMAN: And what’s fascinating to me, speaking as somebody who practiced law for a long time, is that people often confuse what’s legal for what’s ethical, and the two have nothing to do with each other, do they?

HARNED: You know, Aristotle said that law floats on a sea of ethics, but to get away from the philosophy of it, when you think about the law, that’s how companies start to talk about compliance. We care about making sure that we’re obeying the rules, we’re obeying the law, but compliance has to do with what you shouldn’t do. Ethics has to do with what you should do. How do we want to be? What’s the standard we want to apply to our work?

ABERMAN: So, when you work with companies, often you’re working with organizations after there’s been a breach in ethics. I mentioned your work with Penn State and British Petroleum. I think of them. I think of companies like Volkswagen, for example with the diesel situation where they were producing engines that people in the organization knew didn’t actually reduce pollutants. When you come into an organization after the fact, how do you get an organization back on track, so that it has positive values?

HARNED: Most of the time, if they’ve had a situation on the scale of a BP, on the scale of a Penn State, I don’t have to do a lot of arguing with them to get them to think about the importance of integrity. They almost always have that insight. They want to learn from what happened; they want to change the way they’re working. So then, it becomes a conversation about culture, and the importance of leadership in setting a tone, and purposefully trying to establish a culture where people will come forward and raise concerns, where people will observe the values, and challenge each other to improve their conduct.

ABERMAN: So, an organization that has faced a PR challenge or a financial disaster because they didn’t engage in positive compliance, that’s a hard enough argument to make. What’s the argument you make when you come and you talk with business leaders who have not yet had to run into the crisis created by a rogue employee, or an unethical act?

HARNED: Our research has shown that, when leaders are committed to setting a standard for integrity, their employees observe about fifty percent less misconduct than organizations where leaders just overlook the importance of that. So, you can actually map an organization by people’s perceptions of leadership, their perceptions of their own manager, and their commitment to integrity, and the extent to which they’re observing wrongdoing a daily basis.

ABERMAN: I had somebody remarke to me recently that, with the state of the current environment, and the amount of distrust that now exists with politicians, that business leaders are actually one of the few institutional actors in our country that still have some credibility with people. Do you think that this creates an opportunity, but also risks, that business leaders don’t think about? Acting unethically, they can either disappoint people and harm themselves or, if they act ethically, they can create an opportunity to really advance their businesses now. Is that true?

HARNED: My experience is that most business leaders actually care about ethics.They care about having a company that’s going do the right thing, and if nothing else, stay out of trouble. But I think the challenge for business leaders, even for federal government leaders, any kind of leader, is that they often take for granted that the organization is just going to do the right thing. That, because they personally care about integrity, everybody else is going to. So, it takes a systematic effort. I think you’re right, especially right now, the private sector tends to have much more formal and successful ethics efforts than we’re seeing in government agencies, but there is an opportunity for there to be improvement all across the board.

ABERMAN: Now, I understand you’re working with an agency here in town. In general, do you see the government really focusing on ethics as an operational matter?

HARNED: Ethics in the government is very different from ethics in the private sector. There are ethics requirements and ethics programs in federal agencies, but very often they’re narrowly defined. It means conflicts of interest, financial disclosures. Even the Office of Government Ethics, their charge is to make sure that there is sufficient training in disclosure forms. What is ironic is that, in some agencies, when they’re enforcing the law against the private sector, they’re applying standard for an ethics program that they’re not actually living by.

So, the best practice, the thing that makes the biggest difference in an organization, is to have a values-based ethics program. You’ve got a set of core values. You help people to understand what they are. You work to create a culture where people will report wrongdoing. You think more broadly about ethics. Those kinds of programs don’t exist in the federal government. They’re not required, and unless there are some leaders that have a lot of foresight, and think about those things, they’re not happening.

ABERMAN: Pat, why did you choose this is as your life’s mission? Why are you doing this?

HARNED: I sort of fell into it, actually. I came from the educational sector, and I had been working on a university campus where I was the judicial officer, and there were a couple of incidents where, I noticed that the University didn’t want to weigh in on issues that were not direct violations of law or regulation, and I saw the impact of that on students. That helped me to start thinking about ethics as a career path. So, I got my start in this industry by writing curriculum for schools, and then when I came to the organization I’m with now, I got much more involved in business organizations and government work. It’s the same kind of concept. The way you teach ethics to people in a school is the same way approach encouraging ethics in business.

ABERMAN: I want to thank you for taking the time. That was Dr. Pat Harned, she is the head of the D.C.-based Ethics and Compliance Initiative. It was great having you, Pat. Thank you.

HARNED: Thank you so much.

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